When Did Consumerism Overtake Our Nation?

“In a nation that was proud of hard work, strong families, close-knit communities and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we have discovered that owning things and consuming things does not satisfy our longing for meaning. We have learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.” Jimmy Carter in a speech to the American people in 1979.

This was around the time when angry Americans were experiencing extreme high gas prices ($1.25/gal) and long lines…food prices were increasing on a steady incline. This came at a time when the inflation rate in the US was already abnormally high at around 11% on an annual basis. That meant if you bought goods for a $1.00 today you would only be able to purchase approx. $.89 of the same goods one year from now. Inflation became a way of life and an expected part of our world. So, even though Mr. Carter tried to scold American citizens for their lack of self-control and gluttony, the prudential wisdom of saving for the future and avoiding debt was replaced with new ideas. “Smart” young consumers now did the opposite, forgetting the lessons of the past. Though, there was a resulting sense of abundance, it was accompanied by rising prices and anxiety levels.

I understand how they came to their conclusions and actually agree with them to some degree. It makes sense to pay off today’s debts with tomorrow’s cheaper dollars in a period of high inflation. The face value of your debt stays constant, even though the actual value of those dollars decrease. So, in general, this concept makes sense to me.

This is a similar scenario to what happened in the East and West coast real estate markets. People and banks were willing to leverage up to 100% or more on a property because they had come to expect properties to continue to go up in value. In this scenario, leverage makes perfect sense, however, only if you can afford it. Real Estate, like all markets, is cyclical in nature. It’s easy to get short-sited and ignore the lessons of history. If we ignore the lessons of history, we are doomed to repeat them! In my opinion, using leverage can be a smart way to invest in real estate and increase your cash on cash ROI…as long as you do not over-extend yourself. This last year, the real estate bubble finally burst and all the people who could not truly afford their houses were faced with reality. They had taken sound concepts and brought them to very wrong conclusions. It caused them to take on too much debt in order to purchase their properties with no exit strategy or plan for the downside. They were ”all in” and were betting that their property values would continue to increase. I’m sure they had plenty of examples of friends who had purchased a property and sold it 1-3 years later for a profit, all while making interest-only payments in the meantime. It caused so many people to throw out all conventional wisdom…in hopes of making a big score for themselves. It resulted in people making irrational thoughts and decisions.

Some people believe the current recession was caused by the “sub-prime” implosion, but I think that was just a symptom of a greater problem. I started this blog entry with a speech given by President Carter back in 1979, which addressed some of the same issues I feel we still battle today. We are a consumer nation and have no self control. The average person has a negative savings rate, which means for every dollar they make, they actually spend more…leaving nothing for savings. Does this sound familiar? It should! It’s exactly how our fearless leaders have been running this country ever since we were taken off the gold standard. Never in our history have we been so irresponsible as in the last 30 years. After going off the gold standard, the Federal Reserve and our government were given a blank check. I would argue that when the Federal Reserve was created they were given the ability to print money out of thin air, but will save that discussion for another day. I believe that was the first stage of a plan to develop a nation that came to expect debt, deficits and irresponsible use of resources. Then, they could run up debt, increase the money supply and systematically degrade the value of the dollar (also called inflation). Some people don’t realize it, but inflation is really just a “hidden” tax. Every time the Federal Reserve prints money and dilutes the existing dollars, they become less valuable. That value doesn’t just go away, it merely is transferred from the existing dollars to the newly printed money. So, remember this concept the next time you see they are printing trillions of dollars. The value of those new dollars is not incremental value added through increased production or efficiencies gained in our industries…it is simply being stolen from the dollars already in existence. If we were still on the gold standard, they would not be able to create money out of thin air. It would only come into existence if there was tangible value (gold or silver) added to our economy. Back then, it made sense to save your money and grow your wealth. Today, savers are being robbed blind. As they put more and more money in the bank, saving and scraping to build some sort of nest egg, the government is printing our money supply to levels never before seen in this country. Once this new supply filters through our economy, these savers will be wiped out! They will be left wondering how they just spent their entire lives scraping, saving and doing the right thing only to lose it in an instant…and they won’t even know who stole their money. The same thing happened to my grandparents. They worked hard their entire lives, saving and planning for retirement. They sold their business in the late 70’s and had a nice little nest egg. They had high hopes of a comfortable life in retirement. However, inflation raped them of their money and they lived most of their retirement years in poverty. They didn’t even know what hit them or who was responsible for it. They just knew they had done all the right things and were left with nothing to show for it.

I’ll stop there for now…but I’ll write more in a later post.

Cameron Long, CPA
www.PassionForGreatness.com

How To Manage Your Team...The Right Way!

Have you spent the last few months or years struggling to get your team to accomplish their goals? Do you spend all your time helping them get started, trying to teach them everything you have learned over the past few years, or spinning your wheels trying to "force" them to be successful? It's like beating your head against a wall, isn't it?! So, what alternative do you have?

The key is to spend your time guiding them towards their goals, but not accomplishing them in their place. Success is not about how much money someone can make, it's about their growth and development. If you do the work for your team, they will not be successful. They may make some money in the short run, but they will have a hard time maintaining it...and they will not know how to build a business again in the event something happens to their current business.

Spend time with your team members developing their goals. Have them set short term goals and hold them accountable for accomplishing them. Guide them to training, instead of spending all your time training them. Spend most of your time working on your goals and business as an example to show them the right way to focus on building their business. Always offer your help, but never offer to do the work for them! Provide weekly calls for your team so they can bring you their questions. This allows them a great opportunity to ask you questions, get your help and learn from you and the others on your team, but will keep them from stealing your time all throughout the week. As individuals begin to develop and grow, pull them out on the call to do special training for the rest of the team. It's a great way to develop them as a leader.

Leadership is a learned skilled, so be patient with the process. As you grow, so will your team...and eventually, your income will grow as well!

Cameron Long, CPA
www.PassionForGreatness.com

Is Emotional Intelligence Important to Success?

I think for most people this question is one they have never considered. Most believe you need financial or educational intelligence to succeed in life and to accumulate great wealth. While I agree these intelligences are important, I believe emotional intelligence plays a bigger role in the success of an entrepreneur.

First, what is emotional intelligence? It is the ability to look fear and failure in the face and push forward in spite of them. It’s the ability to learn from your mistakes…and being willing to make mistakes in the first place. We are programmed in school to get “A’s” and always learn the “right” answer…the result is learning to fear failure! At the same time, we all know that the best professional baseball players only hit the ball 25-30% of the time. We know that an olympic athlete spends years training for one race, knowing that in the end only one person will come out the winner. It’s ironic to me that while the “real world” requires us to take chances, train in spite of the risks, swing even though we will most likely miss the ball, our educational system is set up to teach us to fear risk and failure. We are taught there is one answer to every problem…it’s called the “right” answer.

In reality, there are many solutions to every problem. If reality was determined by the current known “right answer”, we would never have ended up with airplanes, light bulbs, telephones, toasters…etc..etc…you get the picture. These are all examples of thinking of new solutions to an old problem.

In order to be wealthy, you have to learn to solve problems. Period! Spend your time developing your ability to solve problems, and you will succeed! Have you ever wondered why millionaires and billionaires can lose all their money, yet bounce back. They have developed their ability to find a need and fill it. That’s more important than all the money you could ever accumulate. There is never a shortage of problems, but there is a shortage of problem-solvers.

That takes emotional intelligence…and emotional intelligence is developed by solving small problems, at first…then, working up to bigger and bigger problems. This requires being willing to fail over and over, until you find a solution.

Warren Buffet says that if you can not control your emotions, you can not control your money. It is very important when living the life of an entrepreneur. When you get this, it means that you never point the finger at anyone else to excuse your failures. You never quit! You learn from your mistakes and figure out solutions.

If you are having trouble calling your prospective customers, join your local toast masters to gain confidence in speaking and learn to express yourself through speech. If you feel your sales skills are lacking, take sales training or get a job as a salesman to learn the skills necessary to succeed. Learning these skills will repay you for years and years…avoiding them, will cost you for years and years. They do not go away UNTIL you solve them.

What’s holding you back? Figure out a way to solve it today. What skills do you need to learn? You get the picture.

If you are looking for a good resource on this subject, I highly recommend, “Increase Your Financial IQ, Get Smarter With Your Money“ by Robert Kiyosaki. I get absolutely nothing for referring this book to you, but I believe it will add value to your life. If you are serious about becoming a business owner or investor, you must read this book.

Cameron Long, CPA
www.PassionForGreatness.com